Greenland Holdings Group of China has entered into a preliminary agreement to acquire a majority stake in a 15-tower apartment project in Brooklyn, N.Y. The project is in the Atlantic Yards site which is where the recently constructed Barclay’s Center is located. Brooklyn is undergoing a considerable renaissance and it is not surprising investors are getting in on the action. Provided the deal is completed, it will rank as the largest commercial-real-estate development in the U.S. ever to get major backing directly from a Chinese company.
Greenland will buy a 70% stake from Forest City Ratner Cos., who will continue to manage the job. The purchase price isn’t being disclosed, but Forest City has invested $500 million in the 22-acre project to this point.
Greenland Holdings Group’s chariman, Zhang Yuliang, said the company is “very excited” about the potential partnership. “Atlantic Yards is about more than Brooklyn and New York, as important as this development is for the city,” he said. “It is about how we build sustainable, well-designed housing to meet the needs of diverse groups of people.”
As mentioned above the planned investment will be the latest high-profile investment in U.S. real estate by a Chinese company. In 2013, Chinese investment in U.S. properties has reached $1.7 billion, including billionaire Zhang Xin’s recent purchase of a stake in the General Motors building in Manhattan. That is up from $1.1 billion in all of 2011 and just $22 million in 2008, according to property-data firm Real Capital Analytics Inc.
Greenland is a state-owned company. It is currently building a 2,087-foot skyscraper in the city of Wuhan. Upon completion, this skyscraper will be 400 feet higher than the Shanghai World Financial Center, China’s current tallest tower.
Sources:
http://online.wsj.com/article/a/SB10001424052702304520704579127822887005590.html?dsk=y
http://gizmodo.com/the-developer-of-chinas-tallest-building-invests-in-br-1444098853
Brooklyn has gone through a serious culture change over the past decade, and has really become an attractive area for many workers who want to be in New York but cannot afford the ridiculous cost of living in Manhattan. This increase in demand in Brooklyn suggests that this could be a smart investment by the Chinese. It is pretty startling that Chinese investment in US real estate has increased by over $1.5 billion over the past 5 years, and I would be interested to find out more about what the real incentive behind this move is.
I would be interested to know what the original investment incentives were, as well as the project returns. I took Professor Hoover’s Real Estate Finance class, which really focused on international investment and how difficult it can be. For such a large budget, this can’t have been an easy project to set up. Although American regulations for international investment are certainly more lax than those of the Chinese, they still exist. I also find it interesting that Forest City is relinquishing a 70% stake after already submitting a hefty monetary contribution and continuing to run the project.
Could fears about the Chinese housing bubble be pushing Chinese entrepreneurs to invest in housing projects outside of China to diversify their portfolio? International investment may be hard but China already has several policies implemented in cities to prevent people from purchasing 2nd and 3rd homes as investments. One reason for investing in the US instead of China could be financing.